What is medical necessity in medical billing?

Denials and appeals

What is Medical Necessity?

Also called: medically necessary · medical necessity denial

Medical necessity is a payer's determination that a service was appropriate for the patient's condition under its coverage policy. It is established by the pairing of diagnosis and procedure codes and supported by the documentation — which means a medically necessary service can still be denied if the coding does not demonstrate it.

For Medicare, the governing policies are National Coverage Determinations and the Local Coverage Determinations issued by your Medicare Administrative Contractor. Because LCDs vary by contractor, the same service can be covered in one state and denied in another.

Most medical necessity denials are documentation problems wearing clinical clothing. The service was appropriate; the note did not say so in terms the policy recognizes, or the diagnosis code was too unspecific to match.

Where Vizora handles this

Denial management

Primary sources

Where "Medical Necessity" is defined by the bodies that set the rules, rather than by us.

Medicare Coverage Database (LCD/NCD) (opens in a new tab)
Centers for Medicare & Medicaid Services — Searchable national and local coverage determinations. The direct answer to whether a diagnosis supports medical necessity for a given procedure.
Medicare Benefit Policy Manual (opens in a new tab)
Centers for Medicare & Medicaid Services — What Medicare covers and under what conditions, as distinct from how a claim is processed. The starting point for any coverage or medical necessity question.
Advance Beneficiary Notice of Noncoverage (ABN) (opens in a new tab)
Centers for Medicare & Medicaid Services — The form and the rules for issuing it. Whether a non-covered service can be billed to the patient usually turns on whether a valid ABN was obtained beforehand.

Last reviewed August 20, 2026

Related terms

ICD-10-CM

ICD-10-CM is the diagnosis code set used in the United States to report the clinical reason for a service. Codes run three to seven characters, and the later characters carry specificity — laterality, encounter type, episode — that payers increasingly require before they will accept medical necessity.

Appeal

An appeal is a formal request that a payer reconsider a denied claim, supported by documentation addressing the stated denial reason. Commercial payers typically allow 90 to 180 days from the remittance date; Medicare provides five escalating levels beginning with redetermination within 120 days.

Prior Authorization

Prior authorization is a payer requirement that a service be approved before it is delivered. Without it, the claim is denied regardless of medical necessity, and in most contracts the balance cannot be billed to the patient — the practice absorbs it entirely.

Find out what your denials are costing you

A free billing audit reviews your denial rate, AR aging and clean claim rate against industry benchmarks. Takes about two minutes to request. No sales pitch.

Get your free billing audit Estimate your revenue leak

No setup fees · You pay when we collect · Pricing from 3% of net collections